In its recent white paper TotalMarkets, A Blueprint for a Better Tomorrow, Nasdaq advocated for several changes it said would make markets more equitable and efficient.
In its first major policy change action in the wake of launching the TotalMarkets campaign, Nasdaq called for reforms to the definitions of “professional” and “non-professional” users of market data in order to modernize them. The new definitions should have a positive impact on Mom and Pop investors and the companies that service them.
For many years, market data fees have differed for various categories of users. This includes distinguishing between professional versus non-professional users, based on the use case and the ability to pay for the data. Nasdaq proposes to revisit the working definitions of Professional and Non-Professional to more accurately reflect whether data is actually used in a manner consistent with each category. For example, should a person trading hundreds of thousands of dollars daily at a home office be considered a Non-Professional? Similarly, should a plumbing service in the legal form of a limited liability company (“LLC”) be charged a professional fee if that LLC is a small business that has no connection with trading?
“We should modernize the user definitions to achieve the same general goals while streamlining the administrative process,” the Nasdaq paper explains.
Oliver Albers, Senior Vice President and Head of Strategic Partnerships with Nasdaq’s Global Information Services told Traders Magazine: “The time is right to modernize the distinction between Professional and Non-Professional, given advances in technology and how consumption of data have changed since the definitions were introduced years ago. We want Main Street investors to have greater access to the financial markets, and this will go a long way to help that.”
Albers said that a priority in the exchange’s proposals is making certain that most individuals investing their own money are not paying Professional fees. He argues that Main Street investors rely on the markets to build and protect wealth without paying fees intended for professional and institutional users.
Nasdaq emphasizes five main points in its proposals to clarify the distinction between professional and non-professional investors to alleviate industry burden:
“Main Street investors seeking to build and protect wealth are vital to the economy and to our future. We’re engaging with the public to build support for positive regulatory change and increase access to our financial system for more investors around the globe,” Albers said in Nasdaq’s announcement. “Modernizing the distinction between Professional and Non-Professional users is a necessity for modern, efficient markets. It’s important that regulations keep pace with technology.”
As part of its effort, Nasdaq is seeking comment from the public, and plans to assess the industry’s response to these ideas and file a set of proposals with the SEC.
Nasdaq said it will also continue to push for reform on this topic at the Securities Information Processor (SIP) level. The SIP provides a consolidated equity data feed for the benefit of the investing public and also differentiates between Professional and Non-Professional users. It is governed by a coalition of exchanges and market participants and overseen by the SEC.
